Buyer Emerges For Bmw's Rover

Group Led By Ex-ceo Of Troubled Carmaker

LONDON — A British consortium clinched a last-minute deal Tuesday to take over the money-losing Rover car business from Germany's BMW AG and save thousands of jobs in Britain's industrial heartland.

The successful bid by the Phoenix consortium, led by former Rover Chief Executive John Towers, staves off the closure of the country's largest car factory. For BMW, the sale ends a costly foray into the mainstream auto market. The luxury carmaker invested some $4.1 billion in a failed six-year effort to restore Rover to profitability.

Chronic losses at Rover cost at least two top BMW executives their jobs, depressed the value of BMW stock and even caused concern that the German company might become a takeover target. BMW warned last month that it would shut down Rover's car operations if it didn't find a buyer by the end of May.

Phoenix will take over development, production and distribution of Rover Cars, acquiring rights to the MG brand and a license to the Rover marque. It intends to keep production at about 200,000 units a year.

The profitable Land Rover operations are not part of the deal; they are being sold to Ford Motor Co. for $2.9 billion.

Despite jubilation among Rover employees and Phoenix supporters, analysts are skeptical that the consortium will succeed in reviving a business derided in German automotive circles as "The English Patient."

"It's a stay of execution," said Mark Norman of CAP Motor Research Ltd., a research group based in Leeds.

"It's not going to be easy for them," added Gilly Filsner, an analyst at Ludvigsen Associates, a London-based consultancy for the auto industry. "Doing the deal with BMW was the easy part. The job now is for Phoenix to convince people to buy its cars at a price where it can make a profit."

Phoenix agreed to pay BMW a symbolic price of 10 pounds--about $16--for Rover, but BMW spokesman Hubert Bergmann said that the German carmaker has offered to lend Phoenix $765 million to help the consortium get Rover off the ground.

Rover has greatly improved the quality and styling of its cars since the 1970s and '80s, when the business suffered from chaotic labor relations and poor management as part of state-owned British Leyland Motor Corp. But Rover still has a weak brand image. Also, the strength of the pound has hurt sales in Europe, where it competes against vehicles priced in cheaper euros.

Undeterred, Phoenix aims to restore Rover to profitability within two years. Officials said they will lay off fewer than 1,000 of the 8,500 workers at its Longbridge plant in Birmingham, in central England.

Towers and his partners formed Phoenix in response to a bid for Rover by the British venture capital firm Alchemy Partners. Alchemy had planned to sharply curtail output at Longbridge and had indicated that it would lay off a large part of the factory's workforce.